Low-Cost Franchises for Sale: What to Know Before Buying

Introduction

Today, I just wanted to go over a few of the myths and truths of owning a low-cost franchise.

The number one point that often is not spoken to would-be franchisees of some of these low cost franchises, which are generally under $100,000, is there’s not enough profit margin for a day-to-day manager. So as a franchisee of low cost franchises, it could be in the service sector, you can expect to work full time for the first 12 to 18 months. You can expect to work full time for the first 12 to 18 months. Today you will learn about the truth of these franchises. In addition, you will learn about low cost franchises with high profit in the franchising industry.

Item number two is it takes a long time to build up that initial customer base and pass breakeven, where some franchises, especially in the food sector, might break even after three, six months. For some of the service brands, it can take up to 12 months or more, especially for service concepts like staffing, it can take 18 months to break even. It’s really important to talk to current franchisees of any franchise model that you’re thinking about investing in to see how long it took them to break even, and as well as until what time was there enough profit margin to potentially have a day to day manager in place.

Point number three, I mentioned working full time. Full time has different definitions depending who you are. Many of the service concepts that we’ve looked at in the $40,000, $50,000, $60,000 range require or strongly suggest and that most of the franchisees that are doing this, working 50 to 60 hours a week for the first year. So this essentially requires a full time commitment in the business without earning any money. So make sure that you’re comfortable with that. And perhaps you have a spouse that has a job or another business with steady income coming in because for about 6 to 12 to 18 months, you can expect to make no money at all, or very little money in many of these service-based low franchise cost businesses.

5 Low Cost Franchises with High Profit

The franchising industry can be a challenging one especially if you haven’t had any prior experience with franchising before. Here are  5 low cost franchises with high profit, ranked by net unit growth.

Chick-Fil-A

• Total U.S. Locations: 2410
• Net Unit Growth (3 years): 273
• Initial Investment: $518K-$2.8M

This restaurant franchise specializes in boneless breast chicken sandwiches. They have a loyal customer base that they maintain by offering them the best-tasting meals and excellent customer service. In addition, Chick-Fil-A usually covers all the opening expenses which is something most franchisors don’t do.

JDog Junk Removal And Hauling

• Total U.S. Locations: 174
• Net Unit Growth (3 years): 32
• Initial Investment: $30K-$157K

JDog Junk Removal And Hauling is a junk removal franchise that is considered to be one of the best in the junk removal industry. They offer ongoing support to their franchisees through their franchise business consultants. Also, their comprehensive training program covers all aspects of the business, from marketing and sales to operations and customer service.

Home Instead

• Total U.S. Locations: 616
• Net Unit Growth (3 years): 5
• Initial Investment: $98K-$125K
• Royalty Fees: 6%

Home Instead has numerous locations all around the US. They provide their customers with services ranging from meal preparation and personal care to CPR and first aid. Having a Home Instead franchise can be a profitable investment for many considering it is the largest senior care franchise in the healthcare franchise industry.

SuperGlass Windshield Repair

• Total U.S. Locations: 180
• Net Unit Growth (3 years): 4
• Initial Investment: $38K-$113K
• Royalty Fees: 6%

This franchise is unique since it has low overhead costs because of its mobile-based business model. Also, they ensure that you succeed by providing you with marketing tools, strategies, and resources. These resources include your own website and Google Business Profile as well as ongoing training and support from their team.

Chester’s

• Total U.S. Locations: 1081
• Net Unit Growth (3 years): -145
• Initial Investment: $28K-$297K

Chester’s is considered one of the best chicken franchises that are also one of low cost franchises with high profit. Chester’s offers its franchisees continuous support to ensure they maximize their profitability while ensuring that their margins are aligned. They also offer a low investment in general, though it might vary due to where you will locate your franchise.

Above are the 5 best low cost franchises with high profit. These franchises can be a great way to start your entrepreneurial career without spending too much money.

Failure Rate

The final point is the failure rate is pretty high for many of these low-cost franchises. Our analyst looked at over 2,000 different franchise brands, and how they performed with the 7(a) program under the SBA program… Cut. Our analyst at Vetted Biz looked at over 2,000 franchise brands. Many of these franchises were low-cost opportunities under $100,000 that tended to have high default rates depending on the specific industry, as well as the specific franchise opportunity.

Some of the reasons that might contribute to this high failure rate is it’s a low entry amount, so it’s easy to get in, a lot more interest, perhaps even competition in those different industries. Also some of the systems have less commitment from the franchisor. You’re not working with the franchisor on selecting the real estate, building out the store. There’s not extensive training on-site oftentimes. So there’s less commitment on the side of the franchisor, and then also on the side of the franchisee in terms of signing a commercial lease for 5 years or 10 years, and having that personal guarantee.

Many of the service-based concepts can be operated from your home, a shared office, a month-to-month rent office space, as many of the services are conducted outside of your business premise.

Conclusion

So in summary, low-cost franchises often don’t have enough profit margin for a manager. Also, the franchisee for the first year is generally working many hours, it could be 50 to 60 hours plus. It can take a long time to build your customer base and then break even, as well as many of the brands in the low-cost category sub-$100,000 franchise investment have pretty high franchise failure rates. However, you should pick the franchise that fits you best based on your needs. You can consider the 5 best low cost franchises with high profit that we mentioned in this article.